Consequences for opening a Roth IRA as a soon-to-be expat?

[cheryaaan]

I've been trying to research this but everything I can find seems tangentially relevant to me (e.g. for citizens looking to maintain citizenship while working in another country, people in my situation but with 401(k)s, etc). Any guidance or more reading on this is much appreciated.

I've been in the US on a green card for years and I would like to move elsewhere in the next few years. (I'm a Canadian citizen.) I'm still not entirely sure whether I'll give up my resident status, but I'm leaning towards giving it up. I'm in my early 20s and am feeling the pressure to open a Roth IRA, and wouldn't hesitate to do so if my future weren't so hazy. I'm looking for flexible options for my money since I'm not sure about what country I'll end up in. Ultimately, I don't want to be tied down by tax penalties as I move from country to country, or if I have to be I'd like to keep it minimal if at all possible.

I've read that "[m]any brokerage firms will insist that you close your account once you are no longer a US resident...More American expatriates are turning to firms that specialize in investment management for non-US residents in order to deal with these issues." I've seen Interactive Brokers mentioned on this sub as an option for said non-US residents, but most of the info is for general investing, not retirement accounts. Does anyone here have experience maintaining or transferring a Roth IRA once they left the US? What resources did you use? (Books, blogs, etc.)

I know this post is hella vague but any insight at all will be helpful in narrowing down exactly what I need to figure out lol. And if a Roth IRA just isn't a good option in the end, any recommendations for alternatives would be swell

 

[roseanne7]

@cheryaaan You're unsure about giving up the Green Card, so just open a Roth IRA now and decide later whether to fund it. I say 'now' because it's more difficult to open one from abroad with no fixed US address. I live in the UK and Schwab has been fine for me, they don't care if you are no longer resident.
If you decide to keep the Green Card, the Roth IRA will be your best option for tax free growth. Foreign investment accounts will not be treated favorably by the US. Good luck

 

[danicajav]

@roseanne7 Totally agree that opening (but not funding) a Roth is a good place to start.

 

[laurence99]

@cheryaaan https://atucker-26536.medium.com/as...sion-or-roth-ira-still-make-sense-3bb79d3b7f6

 

[alxspntral]

@cheryaaan I am not an expert. However I have lived as an expat on and off. I was advised NOT to open a Roth IRA or fund it while abroad. The reason is that there is a penalty for funding a Roth IRA if you are abroad and utilize the foreign earned income tax exemption. In that case your income is listed as zero USD and yet you've made a taxed contribution to a Roth IRA.

On the other hand, I was encouraged to put such money into a Roth 403(b) or Roth 401(k) with money I wanted to put away because it works differently.

So...something to think about. I'd just reach out to a financial advisor or accountant about this if I were you.

 

[myjesus777]

@alxspntral Do you have the contact details of someone to speak with about this?

 

[alxspntral]

@myjesus777 Not in particular. If you're in the US or a US citizen, I would check out financial advisors and accountants. If you have a hometown in the US, look for financial advisors and accountants either local there or near the capital/nearest urban areas. The small-town tax preparer might not know this, but there will be someone who works in an urban center who might have more experience and knowledge.